ITO 17(2)(4), MUMBAI vs. MUKESH DALICHAND SHETH, MUMBAI

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ITA 7467/MUM/2018Status: DisposedITAT Mumbai31 January 2020AY 2011-123 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, reducing the addition to 6% on the bogus purchases. The Tribunal found this reduction to be correct and reasonable, considering the assessee's contentions and the fact that sales were not doubted.

What were the facts?

The Assessing Officer (AO) made an addition to the assessee's income based on bogus purchase entries identified by the DGIT (Inv.). The AO applied a 12.5% rate on these purchases, while the CIT(A) reduced it to 6%.

What were the issues?

The primary issue was the rate at which to tax the profit element on bogus purchases. The Tribunal had to decide whether to uphold the AO's 12.5% addition or the CIT(A)'s reduced 6% addition.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 148,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR

Hearing: 06.01.2020Pronounced: 31.01.2020

Per Rajesh Kumar, Accountant Member:

1.

The present appeal has been preferred by the Revenue against the order dated 11.10.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.

2.

The only issue raised by the Revenue in grounds of appeal is against the order of CIT(A) restricting the addition to 6% as against 12.50% done by the AO.

3.

At the time of hearing neither assessee nor his authorized representative appeared for attending the hearing nor any adjournment application was received despite service of notice through RPAD. We, therefore, are proceeding to decide this appeal on merits after hearing the ld. DR.

3. The facts in brief are that the assessee filed his return of income on 27.09.2011 declaring total income of Rs.2,82,681/- which was processed u/s 143(1) of the Act. Thereafter the AO received DGIT (Inv.), Mumbai that the assessee is beneficiary of hawala purchase entries to the tune of Rs.13,40,412/- and accordingly reasons were recorded and notice u/s 148 dated 13.03.2015 was issued. The AO issued show-cause notice to the assessee to prove the genuineness of the purchase failing which why the same should not be added to the total income of the assessee. Accordingly the assessee filed a copies of bills, vouchers and other evidences to prove the genuineness of the purchases. However the reply of the assessee did not find favour with the AO. Ultimately, the AO observed that the assessee has made respective sales and therefore the only presumption to this effect was that the assessee has made purchases from grey market at lower rates and thus after relying the decision of Hon’ble Gujarat High Court in the case of CIT vs. Bholanath Ply Fab Pvt. Ltd. (2013) 355 ITR 290 applied the rate of 12.5% on the said bogus purchases by making an addition of Rs.1,67,552/- by framing assessment u/s 143(3) r.w.s. 147 dated 27.11.2015.

4.

In the appellate proceedings, the ld. CIT(A) partly allowed the appeal of the assessee by restricting the addition @ 6% on the bogus purchases after taking into account the contentions and submissions as made by the assessee during the course of appellate proceedings.

5.

After hearing the ld. DR and perusing the material on record, we observe that in this case the undisputed facts are that the assessee was beneficiary of hawala purchase entries to the tune of Rs.13,40,412/-. Though the assessee has tried to substantiate and prove the genuineness of the purchases , yet the AO sought to assess the profit element on the said bogus purchases on the ground that these purchases were made from hawala dealers who were engaged in issuing bogus purchase bills and thus applied a rate of 12.5% on the bogus purchases thereby making an addition of Rs.1,76,384/- by following the decision of M/s Bholanath Poly Fab. P. Ltd. (supra) by not doubting the genuineness of the sales. The ld. CIT(A) reduced the addition to 13,40,412/- by applying 6% on bogus purchases after taking into account the contentions of the assessee which appears to be correct and reasonable. We are therefore inclined to uphold the order of the ld. CIT(A) on this issue which is in consonance with the decision of the various High Courts and Tribunals by dismissing the appeal of the Revenue.

6.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the open court on 31.01.2020.

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